Where FIRPTA Reforms Will Hurt Most

The recently passed FIRPTA reforms have a major impact on foreign investors in U.S. real estate. Experts from AFIRE and Wafra discuss.

The reforms to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) were passed on Dec. 18, 2015, and will have a major impact on foreign investors in U.S. real estate. Investors can now have sole ownership of U.S. property and own 10 percent of a REIT—twice the previously allotted amount. And foreign pension funds are now exempt from FIRPTA.

According to the 24^th annual survey from AFIRE—the Association of Foreign Investors in Real Estate—64 percent of the members plan on a major or modest investment increase in 2016, and no one is planning to decrease their investment activity. “It’s the first time that there’s never been anybody [saying] ‘We’re not going to do a measured decrease in our portfolio,’” says Jim Fetgatter, chief executive of AFIRE.

He adds that it makes deal structuring easier for foreign investors. They’ll no longer have to work around FIRPTA sanctions, which was previously a significant barrier.

You can watch a clip here:

Watch the full video or download the transcript here, in which Fetgatter and Frank Lively of Wafra Investment Advisory Group also discuss concerns about rising interest rates, growth within the wider U.S. economy, and how pricing of properties could dampen the appetite of foreign investors in the medium-term.